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All about student loans-Default, Collections, Lawsuits and Repayment
This section covers everything you need to know about student loans including default, cancellation, rehabilitation, forbearance, collections, lawsuits, bankruptcy and where to get help. This page is loaded with information so bookmark it today.

Student Loan Collections
What might happen if you fall behind on your payments.
After lots of publicity about deadbeat college grads who didn't pay back their loans -- and cost the taxpayers almost as much as a few toilet seats on Navy fighters -- Congress decided to crack down. The Department of Education was given powerful tools to use against former students who don't make their payments.

Assessing Collection Fees
Defaulting on federal student loans can cost you a bundle -- far in excess of the amount you borrowed originally. Guarantee agencies typically add a collection fee of 25% to the principal, interest, penalties and other collection fees you already owe. (If you try to negotiate a payment plan to get yourself out of default, the guarantee agency will cut the fee to 18.5%.) In addition collection agencies charge the Department of Education a commission of about 28%. That commission is passed on to you, meaning you have to pay the money you owe on the loan, the collection fee and the commission.

Grabbing Your Income Tax Refund
The IRS can intercept your income tax refund until your defaulted student loans are paid in full. It is one of the most popular methods of collecting defaulted student loans. Annually, the Department of Education collects hundreds of millions of dollars this way. The IRS can intercept a refund only if the loan is held by a guarantee agency, the Department of Education or a collection agency working for one of those two. If your school, the lender, a loan servicer or a company on the secondary market has your loan -- even if you are behind on your payments -- your tax refund is protected from the clutches of the IRS.

Each tax year, the agency holding your loans must review your account to verify that you haven't made payments on your loans within the previous 90 days. Once it verifies this information, the agency notifies the IRS that your loans are in default. If you are entitled to a tax refund, the agency will notify you that the IRS proposes to keep all or some of it. To object, you must present written evidence, within 65 days of the date on the notice, of any of the following:

-You've repaid the loan.
-You are making payments under a negotiated repayment agreement, or you've been granted a cancellation,-deferment or forbearance.
-You have filed for bankruptcy and your case is still open, or your loans were discharged in bankruptcy.
-You are totally and permanently disabled.
-It is not your loan.
-You dropped out, and the school owes you a refund.
-You borrowed the money to attend a trade school and were either unable to complete your education because the school closed or you were falsely certified by the school as eligible for the loan.

Paring Your Paycheck
The Department of Education and guarantee agencies are authorized to take ("garnish") 10% of the wages of a student loan debtor who is in default. Unlike virtually all other creditors, the holder of your student loans does not have to sue you first. You can object to the garnishment if you've returned to work within the past 12 months after being fired or laid off. Call or write to the agency. If you have been continuously employed for the previous 12 months, you can raise one of the objections permitted when the IRS seeks to intercept your tax refund. (See above.)

You can also object to the garnishment if it would leave you with a weekly take-home pay of less than 30 times the federal minimum wage ($5.15 as of September 1), or $154.50. The only other way to avoid wage garnishment is to contact the holder of your loan and negotiate a repayment schedule.

Getting Sued
You can be sued forever on your defaulted student loans. And the Department of Education is suing former students more and more frequently. Student loan collection lawsuits filed by the Department increased by 55% between 1997 and 1998. You aren't likely to be sued, however, if the agency holding your loans determines that:

-the cost would exceed any amount it could get from you, or
-you have no assets that could be taken to satisfy all or a substantial portion of the debt.

In addition, the Department of Education forbids agencies holding defaulted student loans to sue unless:

-your income is too low to be covered by the wage garnishment and
-you have assets (other than wages) that could be taken if the Department of Education won the lawsuit and obtained a court judgment against you.

What property the Department of Education could take from you depends on where you live. In most states, the Department can go after your bank and other deposit accounts, and valuable personal property such as cars and antiques. The Department can also file the judgment with the county records office to create a property lien -- a notice to the world that you owe money. In some states, a judgment entered against you automatically creates a lien on any real estate you own in the county where you lost the lawsuit. In other states, the creditor must record the judgment with the county. When you sell or refinance your property, all liens must be removed, usually by paying the lienholder -- before the deal can close.

Getting Out of Default
How to rehabilitate your loans and get back on your feet.
The Higher Education Act provides ways for a former student holding federal loans to get out of default. Under these programs, you can "rehabilitate" your loan by making 12 consecutive monthly payments. If you're in default on a bank or Department of Education issued loan (such as a Stafford Loan) the payments must be "reasonable and affordable." If you're in default on a school issued loan (such as a Perkins Loan), there is no "reasonable and affordable" provision, but similar standards are likely to be used for both.

The holder of your loan negotiates your monthly payment amount with you, considering:

-your disposable income -- the amount that remains after mandatory deductions, such as Social Security, taxes, union dues and child support withholdings, and
-your necessary expenses -- including housing, utilities, food, medical costs, dependent-care costs, work-related expenses and other student loan repayments.

The Department of Education has not established a formula for deciding what is an appropriate monthly amount, but the law does have some negotiation guidelines. For example, an agency cannot establish a minimum amount -- such as $50 per month -- for all former students who want a plan. Each repayment plan must be individually negotiated with the former student who requests it. If your expenses exceed your income, the agency can set a low monthly repayment amount, such as $5. For bank and Department of Education issued loans, if the agency agrees to an amount of less than $50 per month, however, it must place documentation in your Department of Education file showing why you are entitled to make low payments. Because low payment plans require this extra paperwork, many agencies resist setting payments under $50. But the law is clear that you are obligated to pay only what is reasonable and affordable -- and not a penny more. If the person with whom you speak refuses to grant you a low amount, ask to speak with the collections supervisor.

Before you request a repayment plan from the holder of your loan, gather bills, receipts, court orders and all other papers showing your necessary monthly expenses, as well as pay stubs or receipts of public assistance. The agency may send you a form to complete on which you list your income and expenses. If you completed a budgeting form, you can use the figures on it to complete this form. Attach a letter or statement pleading your case for an amount no more than you can truly afford. If you're more comfortable and feel you would be more persuasive talking rather than writing, call the agency representative and discuss the matter over the phone. You may still be required to complete a financial form in addition, however.

The agency will take anywhere from a few weeks to a few months to review your request. Once the agency decides on an amount you must repay each month, it will send you a notice of what it is. If it would be too much of a financial strain to make the payment every month, contact the agency at once. Do not enter into a repayment plan on which you are apt to default. The repayment program is a once-in-a-lifetime opportunity. If you don't live up to your promised payments, the government will not grant you another chance to get out of default this way. Once you agree on a repayment amount, the agency will send you a confirming letter. The letter will spell out the terms and conditions of the repayment program, which are quite extensive.

If you make six consecutive monthly payments on time -- that is, within 1-5 questions or 6-10 questions of the monthly due date -- you will become eligible to apply for new federal student loans or grants if you want to return to school. While you are applying for your new financial aid and even once school begins, you must continue to make the payments under your repayment plan. You must make at least 12 consecutive payments for your loans to come out of default. Once that happens, you can apply for an in-school deferment. Even if you do not intend to return to school, the same rules apply. That is, once you make 12 consecutive monthly payments, your loan will no longer be in default. If you are eligible, you can then apply for a deferment -- that is, arrange to postpone your payments. Continue to make your monthly payments until your deferment is granted.

If you are not eligible for deferment, once you make 12 payments, the guarantee agency or Department of Education can sell your loan back to a company on the secondary market. This is called loan rehabilitation. Once your loan is rehabilitated, you will be put on a standard ten year repayment plan. If you've been paying very small amounts for 12 or more months, the new monthly payments probably will increase dramatically. If you can't afford them, you will need to request one of several flexible repayment options available.

A Rose by Any Other Name
To get out of default using these repayment plans, you must ask the holder of your loan -- the guarantee agency, the Department of Education, your school or a collection agency -- for such a plan. Unfortunately, many people who work for these agencies won't know what you are talking about when you use the phrase "repayment plan to get out of default". It seems that representatives of these agencies receive different training about the program. You will most likely get what you're after by making one of the following requests.

-I want a repayment plan to renew my eligibility.
-I want to rehabilitate my loan.
-I want to qualify for loan consolidation.

It doesn't matter that you have no interest in applying for a new loan -- that is, renewing your eligibility -- or consolidating your loans. You have to use this language. And if one request falls on deaf ears, try repeating your request using the other terminology noted above.

Your Repayment Options
Most lenders offer a variety of repayment plans.
When it comes time to repay your student loans, you'll be relieved to know that many lenders offer a variety of repayment plans -- some of them quite flexible. Which plans are available to you depends on the types of loans you have. If you have bank or government issued federal student loans -- for example, Stafford loans -- you can choose from several repayment plans designed to make your life less stressful. If you have school issued federal student loans -- such as Perkins loans -- ask your school about its options for repayment. Private loans, made without federal funds, come with fewer repayment options. (These loans are made primarily to graduate or professional students, and have names such as MedCAP, MBA-EXCEL, ENGAssist or LAWLOANS.)

You may want to pick just one method or, if you have several loans, combine approaches to create the best repayment strategy. To investigate your options, call your lender, loan holder or loan servicer. But don't wait until you're seriously behind in your payments -- if you're in default on your loans, many of these options won't be available to you. If you're eligible for more than one repayment plan, keep in mind that you aren't locked into the method you choose. The holder of your loan must let you change repayment plans at least once per year.

Standard Repayment Plan
If you can afford the monthly payments, you'll probably want to stick with the original repayment plan offered by your lenders. A standard plan carries the highest monthly payment but costs less in the long haul because you pay less interest. Your monthly payment amount and repayment period will depend on your loan balance, but as a general rule you can plan on shelling out $125 per month for every $10,000 you borrowed. You'll make payments for a maximum of ten years.

Graduated Repayment Plan
Under a graduated plan, your payments start out low and increase every two to three years. It may be your best option if you are just starting a career or business and you expect your currently modest income to increase steadily. If you got a federal loan directly from the government through the federal direct loan program, your payments may start out as low as half of what they would be under the standard plan (though never less than $25/month). Then they'll increase every two years, for 10 to 30 years. Obviously, you'll pay much more this way, but your monthly payments will never rise to more than 150% of the amount you'd owe under the standard plan.

Other lenders may require that you pay only the interest on your loans for a few years. Then you'll switch to payments of principal and interest until your loan is paid off. Your repayment period will always depend on the amount you owe; in extreme cases, it may stretch to 30 years. With any graduated repayment plan, you'll pay more for your loan over time than you would under a standard plan. This happens for two reasons: First, because interest charges are based on your unpaid balance each month, if you keep a higher balance in the early years of your loan you will pay higher interest charges. Second, because you're likely to extend your repayment period to keep your payments from becoming too high toward the end of the loan, you'll be paying interest longer.

Extended Repayment Plan
If you need long-term lower payments, you might consider an extended plan. It lets you stretch your repayment over a period of 12 to 30 years, depending on your loan amount. Your fixed monthly payment is usually lower than it would be under the standard plan (it will always be at least $50), but you'll pay more interest because the repayment period is longer. The federal government and many other lenders allow you to combine an extended plan with graduated payments, which will lower your payments even further -- and increase your overall costs even more.

Postponing Repayment
If your loan payments are enormous or you've fallen on hard times, even the most flexible payment plan might not make ends meet. In many circumstances, it's possible to temporarily postpone paying your loans or reduce the amount of your payments. These periods of relief are known as deferments (during which the government pays your interest) and forbearance's (during which the amount you owe keeps going up because interest isn't being paid). Don't wait until you're already in default because of missed payments -- if you do, your options will be far fewer. At the first sign of trouble, call your loan holder and explain that it's impossible for you to make your monthly payments; you can explore your options for deferment or forbearance with the holder's representative.

Income-Based Repayment Plan
If your income is low or unstable, an "income-contingent" or "income-sensitive repayment" plan may be right for you. As your income rises or falls, so do your monthly payments. The amount of your payment is refigured every year, based on your annual income, household size and loan amount. If you are married, under current rules, your joint income is used to calculate the required monthly payment.

Federal Direct Student Loans
If you have a federal direct Stafford or consolidation loan, you can choose an income-contingent repayment plan. PLUS loans are not eligible. The amount you pay annually will vary, but it will never exceed 20% of your discretionary income -- that is, your annual gross income less an amount based on the poverty level for your household size. (To learn what your maximum payment will be, call the direct loan servicing center at 800-848-0979.) If your income is very low, you may not be required to pay anything under an income-contingent plan -- or the amount you pay each month will be less than the amount of interest that is accumulating. This may feel like a relief, but as time goes on, your loan balance will continue to grow. The only relief comes after 25 years -- if you haven't paid off the loan by then, the government will forgive the rest of what you owe. Even then there's a bit of a catch: The IRS requires you to report the amount of principal forgiven and pay taxes on it.

Federal Loans From Financial Institutions
If you obtained a federal Stafford, SLS, PLUS, HEAL or consolidation loan from a financial institution, your lender or other loan holder probably offers an income-sensitive plan. Such plans are similar to the government's income-contingent plan, with one important difference: there is no provision for loan forgiveness as there is under the government's plan. Because you must pay your loans in full, your monthly payments may be slightly higher.

Loan Consolidation or Refinancing
With loan consolidation, you can lower your monthly payments by combining several loans into one packaged loan and extending your repayment period. As with the other low-payment options described above, consolidating your loans will greatly increase the amount of interest you pay over the life of your loan. Occasionally, however, it may be possible to refinance several loans, or just one loan, to secure a lower interest rate.

You may want to consider consolidating your loans if:

-You can't afford the monthly payments on your federal student loans, don't qualify for a postponement and aren't eligible for any of the low-payment plans described above. This may be true, for example, if you have older federal loans.

-You qualify for some of the low-payment plans described above, but you are so deep in debt that you still can't afford your monthly payments. This may be true if you have many federal loans, or if you have private loans -- which typically aren't eligible for flexible payment plans or consolidation -- in addition to your federal loans.

-You can afford substantial monthly payments and intend to pay off your loans under a standard ten-year plan, but you want to refinance at a lower interest rate.

Many different lenders, including the federal government, offer consolidation loans. Your repayment options will vary slightly depending on the consolidation lender you choose. All consolidation lenders let you stretch the term of your loan from its original length -- typically, ten years -- to between 12 to 30 years, depending on how much money you owe. You can choose a fixed monthly payment or a graduated or income-related payment plan (discussed above), in which your payments start out low and increase. Consolidation lenders are happy to help you figure out what your costs will be under various repayment options. Ask potential lenders to help you calculate your payment amounts and overall costs before you make a decision.

More Information About Loan Consolidation
Because of the complexity of servicing federal student loans, only a few lenders offer consolidation programs. Here's how to contact the largest of them.

Sallie Mae
http://www.salliemae.com
800-524-9100

USA Group
http://www.usagroup.com
800-448-3533

Citibank
http://www.citibank.com/student
800-967-2400

Federal Direct Consolidation Loan Information Center
http://www.ed.gov/offices/ope/directloan
800-848-0982

Department of Health and Human Services
(HEAL loans only)
301-443-1540

Student Loans -- Taking Charge
Paying back your student loans may be a chore, but it's worth it.
If you owe the government or a private lender money you used to pay for your education, you're not alone. Nearly one half of all undergraduates finance all or a part of their education with student loans. The percentage is even greater for students who get advanced degrees: over 50% of all graduate students and 75% of professional students borrow money to attend school. If your student loan debt is high, you may be overwhelmed with the thought of how you will ever repay it. Even if you owe a relatively small amount, you may be struggling. After all, it's harder for someone who earns $1,000 a month to lay out $100 than it is for someone who makes $5,000 a month to repay $500. Millions of people leave the hallowed halls of colleges and universities with a diploma -- and severe anxieties about how to pay off the loans that helped them get it. And if you withdrew from school before graduating, your woes may be worse: you owe money to repay the cost of a credential you never received.

Getting Started
When taking charge of your loans, be prepared to face a world that is complex and often frustrating. To get your bearings, you may need to sort through many different types of loans with names and terms that have changed over the years. You may not even know where your loans are being held -- by your original lender, the Department of Education or some other institution. Even the language may seem strange and intimidating -- grace periods, deferments, forbearance's, defaults -- and those are just a few of the terms you'll encounter. You may face a mountain of unsorted, confusing papers. And you are likely to have some exasperating conversations with government or loan company representatives.

Fighting Back
If you've neither made payments in a while nor arranged to postpone your payments, you may be facing some serious collection efforts. The Department of Education, working with the IRS, collects hundreds of thousands of dollars a year by intercepting the tax refunds of student loan defaulters. Thousands of others have their wages garnished by the government. And if you have no wages that can be grabbed, you might wind up in court defending yourself against charges that you've reneged on your student loan debt. Even if collections haven't reached any of these stages, you may have received nasty and threatening letters or phone calls. Perhaps no one is bothering you, but you're trying to buy a house and the student loans you neglected to pay have damaged your credit and now keep you from getting a loan. Or you may be a recent graduate worried about meeting the monthly loan payments you're supposed to make.

People of all ages and income brackets have student loan problems. Nearly a million people are currently not paying, or defaulting, on their loans. And that is a trend that has grown over the years. Throughout the 1970s and 1980s, the percentage of people who defaulted on their student loans grew each year at an alarming rate, peaking at 22.4% in 1990. The default statistics horrified U.S. government officials. In response, Congress enacted several laws to control defaults. Much of the legislation limits the amount of loan money available to students who attend vocational or trade schools, where the default rate was high as 68% at individual schools and averaged 35% -- several times more than the rate at two-year and four-year schools. But laws that provide for rigorous collection action and the opportunity to get out of default apply to all former students who are behind on their student loans, not just those who attended trade schools.

The laws appear to be working -- at least from the government's point of view. The most recent statistics put the default rate below 9%. In actual dollars, however, the total amount outstanding is $26 billion. And these amounts don't include the money owed by the millions of people who can't repay their loans but who aren't yet in default. These default statistics may depress you. But don't give up. There is much you can do to take control of your own loan situation if you have the right information, a little perseverance and a large amount of patience. Once you've organized your paperwork, made a budget, learned about your repayment options and contacted your loan holders, chances are good that you can create a strategy for dealing with your student loans that really works. Ignoring your loans will not make them go away. Eventually, you will have to deal with them. Further delay just increases the amount you owe, as interest and fees and costs for collection mount up.

Help! I've Already Paid Off My Student Loan
What to do if the Department of Education demands payment on a loan you've paid off.
It's a nightmare for some former students: the Department of Education and guarantee agencies demanding payment from people who repaid their loans years ago. The Department or agency claims that the loan was never paid -- often the financial institution that originally loaned or collected the money is out of business -- and requires former students to prove they paid. This is obviously very difficult, as few people keep bank records. If you face this problem and the financial institution from which you borrowed or repaid the money is still in business, solicit its help in getting copies of your canceled checks. If you're told that it doesn't keep such old records, ask workers there to check the microfiche and other electronic records. If the financial institution is out of business or doesn't have your records, contact the federal agency that oversees the type of institution which had your records:

-National Banks. Office of the Comptroller of the Currency, 1301 McKinney Street, Suite 3710, Houston, TX 77010, 800-613-6743 http://www.occ.treas.gov

-Federal Savings and Loans. Office of Thrift Supervision, 1700 G Street, NW, 5th Floor, Washington, DC 20552, 800-842-6929 http://www.ots.treas.gov

-Credit Unions. National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314, 703-518-6330 http://www.ncua.gov

-State Banks. Members of the Federal Reserve System. Board of Governors, Federal Reserve System, 20th & Constitution Avenues, NW, Washington, DC 20551, 202-452-3946 http://www.bog.frb.fed.us

-State Banks. Not Members of the Federal Reserve System. Federal Deposit Insurance Corporation, 550 17th Street, NW, Room 100, Washington, DC 20429, 800-934-3342 http://www.fdic.gov

You will also need to contact the Department of Education or guarantee agency and provide whatever evidence you have that you paid the loan in full. Contact the Department at:

-Department of Education, Office of Postsecondary Education, 400 Maryland Avenue, SW, Washington, DC 20202, 800-433-3243 (voice), http://www.ed.gov.

Here are some examples of evidence you can use to prove you've paid up.

-If your former spouse or roommate remembers you diligently writing checks every month, have that person sign a sworn statement and send it to the agency.

-Dig up records from lenders for years past for copies of old credit reports listing payments made on the loan.

-Get copies of old tax returns -- from the IRS if necessary -- showing that you itemized the interest deduction on student loan payments back when that was permitted.

-Contact the school you attended for a report from the Department of Education showing the loan's status.

-Request a copy of the signed promissory note from the last holder of the loan with a summary of the account.

-Finally, try contacting the Department of Education's Ombudsman at 877-557-2575. This office is available to assist people with student loan problems.

When You Can't Pay: Cancellation, Deferment and Forbearance
How to postpone payments -- and when you can cancel your loans altogether.
If you're in over your head and you can't make payments on one or more of your student loans, don't panic. And don't just give up and invite default. If you default on your student loans, your credit will be damaged and your loan balance will increase dramatically as collection fees are added to the pot. In the worst scenario, your loan holder will take aggressive action to get the loan money from you, including taking a portion of your paycheck and nabbing any tax refund to which you are entitled. Even if you are unable to make your loan payments and worried about default, all is not lost. But you must act quickly to find out your options. In certain limited circumstances, you may be able to cancel your student loans -- meaning that you are completely absolved from repaying them. You face no negative consequences if you cancel your student loans; however, it is not easy to qualify. You will have to meet specific conditions that depend on what type of loans you have and when you borrowed the money. In some situations, you may be able to cancel only a portion of your loans.

If you can't cancel your student loans, you can probably find a way to postpone making payments by obtaining a deferment or forbearance. A deferment is a delay based on a specific condition -- such as returning to school or being unemployed -- that excuses you from making payments for a set period of time. For some types of loans, you can defer both principal and interest, meaning that during the deferment period, your loan balance will not increase because interest is not accruing. In other situations, you can defer principal only, which means that interest continues to accrue and your balance goes up during the deferment period. Like cancellation, deferment depends on what type of loans you have and when you obtained them -- and you can never obtain a deferment if you are in default.

If you don't qualify for a deferment, you may be able to postpone your payments through a forbearance. When you obtain a forbearance, your loan holder gives you permission to stop making payments for a set period of time. Interest always continues to accrue during a forbearance, which generally makes forbearance less attractive than deferment because your balance will go up during the forbearance period. But forbearance's are easier to obtain because they are not tied to the type of loans you have or the date you obtained them -- and they aren't governed by the picayune rules that make cancellations and deferments so hard to come by. Another possible solution is to discharge your student loan in bankruptcy. However, due to a 1998 change in the bankruptcy law, this is harder than ever to do. In general, you can discharge a student loan in bankruptcy only if you can prove that repaying the loan would be a severe hardship for you. There are several factors that courts consider in making this determination, but suffice it to say, it's a very difficult standard to meet.

Conditions for Canceling or Deferring Student Loans
The circumstances in which you may be able to cancel or defer a student loan are listed below. Read carefully: Some circumstances qualify you for cancellation only, some for both cancellation and deferment and still others for deferment only.

--Death of the Borrower
If a former student borrower dies, the executor -- the person who collects and distributes the property left at death -- can cancel any federal student loan.

--Permanent Total Disability
You can cancel any federal student loan if you are unable to work or go to school because of an injury or illness that is expected to continue indefinitely or result in your death. In most cases, you cannot have had the injury or illness when you borrowed the money, unless your condition has substantially deteriorated. To prove total and permanent disability, you'll need a statement from your treating physician on a form provided by the holder of your loan.

--Temporary Total Disability
If you, your spouse or one of your dependents is temporarily totally disabled, you can defer the payments on most loans obtained before July 1, 1993 for up to three years. The sickness or injury must make you unable to attend school or hold a job for at least 60 days. If your spouse or dependent is sick or injured, you must be unable to hold a job because he or she needs your caretaking for at least three months.

--Enrollment in Rehabilitation Program for the Disabled
If you are enrolled in a rehabilitation program for the disabled, you can defer payments on most loans. You must begin making payments six months after your training ends. You can defer repayment for up to three years if you obtained the loan before July 1, 1993 and up to two years if you obtained the loan after July 1, 1993.

--Unemployment
You can get a deferment on most loans if you are unemployed but looking for work. You must provide documentation of your attempts to find a full-time job -- that is, a job for at least 30 hours per week in a position expected to last at least three months. You can defer repayment for up to three years of you obtained the loan before July 1, 1993 and up to two years if you obtained the loan after July 1, 1993.

--Economic Hardship
You can defer payments on federal loans obtained after June 30, 1993 for up to three years if you are suffering an economic hardship. You are automatically entitled to this deferment if you receive public assistance, such as welfare or SSI. If you don't receive public benefits, qualifying is based on a complex formula that's a mix of your income, the federal minimum wage, the federal poverty level and your monthly or annual federal student loan payments. You will have to provide documentation of your income, such as pay stubs.

--Parents With Young Children
Working mothers and mothers and fathers on parental leave can often defer their student loan payments.

--Enrollment in School
If you return to school to study at least half-time, you can almost always defer the payments on your student loans.

--Membership in a Uniformed Service
For reasons known only to Congress, former students who currently serve the U.S. government wearing a uniform are grouped together for purposes of loan cancellation and deferment. If you serve in the U.S. military, the National Oceanic and Atmospheric Corps or the U.S. Public Health Service, there are several situations in which you may cancel or defer your loans. Check with your supervisor or commanding officer.

--Teaching Needy Populations
Teachers who serve certain needy populations -- including low-income or disabled students -- may be able to have their student loans canceled or the payments deferred. For loan purposes, a teacher is defined as a professional employee of a school or school system who provides classroom instruction or related services as part of an educational program.

--Providing Services Other Than Teaching to Needy Populations
People who do not teach but who serve certain needy populations may be able to have their student loans canceled, depending on the type of loan and population served.

--Performing Community Service
In many situations, you can partially cancel your student loans or defer your payments in exchange for performing community service. Opportunities range from serving in the peace corps to volunteering your time with an organization that assists low-income people in your community.

--Working in the Healthcare Professions
Healthcare professionals, including nurses and physicians in their residency, sometimes can cancel their student loans or defer their loan payments.

--Working in Law Enforcement
Full-time law enforcement and corrections officers can cancel some older Perkins Loans.

--Attended a Trade School
Many former students were lulled into taking out student loans to attend a trade school, only to have the school doors close before they could finish the program. Other students were falsely certified by school officials as being able to benefit from the loan. If this happened to you, you may be able to cancel 100% of your federal student loan.

--Withdrew From School But Never Received a Refund
Students who withdraw from a school or sign up and never attend should generally receive a refund for the portion of the course they did not complete. This refund rule applies only to students who completed less than 60% of the course. If you were entitled to but never received a refund, a new cancellation program allows you to cancel your loan up to the amount of the refund plus fees and interest.

Applying for a Cancellation
To cancel a student loan, or to determine if you qualify for cancellation, call your loan holder or the Department of Education's Debt Collection Services Office at 800-621-3115. A customer service representative will send you a cancellation application, which you will have to complete and return with any necessary documentation, such as a statement from a physician describing your disability.

Applying for a Deferment
Deferments are never automatic. You must apply for them. You can defer repayment of a student loan if you meet one of the conditions described above and you are not in default -- that is, you have made your payments on time, are in the grace period after graduation or have been granted other deferments or forbearances. Occasionally, you may qualify for retroactive deferment -- a deferment that will cover past due payments short of default. To obtain a deferment, you must obtain the appropriate paperwork from the holder of your loan, complete it carefully and follow up to make sure your request is processed correctly. This may sound like a lot of work, but if you're having trouble making your loan payments, it's worth the effort. A deferment can buy you some time when you need it most. Start by contacting the holder of your loan. Tell your loan holder which deferment you think you qualify for and ask for the proper form. The holder's representative will generate the form, including your name, address and account information and should note in your file that you've requested the form. This may help you keep the loan holder off your back if your payments are past due.

Applying for Forbearance
Contact the holder of your loan and explain your situation. You may be sent some forms to complete, requesting information on your income and expenses.

Getting Help
If you need help with any of these programs, contact the Department of Education's Ombudsman at 877-557-2575. This office is available to assist people with student loan problems.

About the author: MR. GROSSBART, ESQUIRE
Robert N. Grossbart, Esquire, is Baltimore born and bred. After graduating from Towson University with a B.S. in 1980, he became a Certified Public Accountant in 1984. Shortly thereafter, Robert was accepted by the University of Baltimore School of Law from which he graduated in 1986. In 1987 he was admitted to the bar of Maryland, US District Court for the District of Maryland and Supreme Court of the United States of America.